Economic Policies + Problems Including Devaluation Flashcards
What were the new lab govt top priorities
-modernisation Br economy + reorganising economy key priority
-by 1964 widely accepted Br lagging behind + affluence post war boom not reflected in growth rates as trapped in stop-go cycle
-bursts prosperity leading to inflation, runs on pound + regular BoP crisis
What was devaluation and deflation
-lab govt inherited £800m deficit
-deflation -> would support value of pound + prevent inflation but was old stop-go policy + fears it would stop lab meeting manifesto pledges of spending on welfare + tech
-devaluation -> made imports expensive + help exporters as Br goods cheaper but would have to cut back global actives + Wilson feared gain rep of party of devaluation
-lab devalued under Attlee 1949
What was the DEA (departments of economic affairs)
-National plan — pledged increase national output 25% by 1970
-chancellor Callaghan didn’t want to deflation or devaluation
-Wilson convinced problems solved with careful planning
-DEA led by George Brown who moved to ministry foreign affairs 1966
-growth targets set + economic planning councils set up
-aim secure restraint to prevent inflation rising + stop-go avoided
Why did the DEA fail
-economic proposal came to nothing as no united govt support + some against Callaghan + economists in treasury
-brown blamed for impulsivity + others blamed old fashioned anti-lab civil servants
-Wilson focussed on keeping key personalities happy rather than picking best man for job
-lack cooperation between Callaghan (treasury) + brown (DEA)
-many measures contradicted deflationary policies required defend value of pound
What was the prices and incomes policy
-was to keep down inflation + implemented a price and incomes board
-but another sterling crisis 1966 due to long strike by National Union seamen but defeated + many shocked by Wilson’s critical attitude to the strike
-trade unionist frank cousins resigned over incomes policy
-relationship between govt + unions starting break down
How did the war in the Middle East 1967 affect the financial problems
-affected oil supplies
-major national doc strike aug 1967 affected BoP + devaluation couldn’t be avoided
-pound dropped by 14% to $2.40 US
-defence cuts + hire purchase restrictions
-policies looked similar to stop-go policies
How did the devaluation crisis impact
-damaged lab credibility as deficit now £1500m + no chance international loans
-2nd EEC application rejected in heels of crisis which made economic policies futile
-but improved markedly with appointment of Jenkins as chancellor who in favour of devaluation since 1964
-Jenkins raised taxes, tightened govt spending + gave top priority to solving BoP
-made govt unpopular but 1969 Jenkins achieved BoP surplus
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